Liquid News. January Liquid Investment Rates (Past 6 Months) Total Fund Assets (Year over Year)

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1 Millins Liquid Investment Rates (Past 6 Mnths) ASBO NY s Strategic Partner fr Investing Public Funds 2.50% 2.30% 2.10% 1.90% 1.70% 1.50% 1.30% 1.10% 0.90% 0.70% 0.50% Jul-18 Aug-18 Sep-18 Oct-18 Nv-18 Dec-18 Rates as f 12/31/2018 Full Flex: 2.35% NYMAX: 1.96% NY CHOICE Full Flex (Weekly Liquidity) NYMAX (Daily Liquidity) Ttal Fund Assets (Year ver Year) 12/31/2018: $1,345,554, /31/2017: $1,032,198, $1, $1, $1, $1, $ $ $ $ $- Fixed Rate MAX The abve prices, yields, and maturities have been btained frm surces believed t be reliable, but are nt necessarily cmplete and cannt be guaranteed. Price, yields, and availability f specific issues are subject t change. This des nt purprt t be a cmplete statement f all material facts relating t securities mentined. The infrmatin cntained, while nt guaranteed as t accuracy r cmpleteness, has been btained frm surces, which we believe t be reliable. Opinins expressed herein are subject t change withut ntice. This ntice shall nt cnstitute an ffer t sell r the slicitatin f an ffer t buy, nr shall there be any sale f these securities in any state in which said ffer, slicitatin r sale wuld be unlawful prir t registratin r qualificatin under the securities law f any such state. Please refer t the NYLAF Infrmatin Statement fr any questins at Page 1

2 Ecnmic Cmmentary The glbal ecnmy decelerates as headwinds munt and tailwinds fade: After enjying slid and accelerating glbal grwth in 2017 and the first half f 2018, mmentum has waned and we expect this trend t cntinue int Financial cnditins have wrsened due t rising interest rates, widening credit spreads, falling stck prices and a strnger US dllar. In the US, last year s fiscal stimulus prgram will prvide less f a bst in 2019 and culd becme a drag n grwth in Prtectinism challenges ur base case fr decent, yet slwing grwth in 2019: One f the largest macrecnmic risks tday is prtectinism, mainly with respect t the US-China relatinship. Tariffs exchanged between the US and China the wrld s tw largest ecnmies have risen in recent quarters and nw cver several billin dllars f trade. The ecnmic damage frm prtectinism s far has been minr and the risk frm prtectinism has actually diminished smewhat fllwing the US-Mexic-Canada trade deal (r USMCA). We are in the later stage f the US business cycle: Cnditins appear t be cnsistent with the histric path f expansin perids when there was n mre than a year r tw left in the cycle. The tight labr market is ne indicatin that we are in the mature state f the expansin. Anther classic late-cycle signal indicatr is that the yield curve is appraching inversin, thugh we recgnize that the signal this time arund may be exaggerated as a predictr f recessin ver the next year. The Federal Reserve (Fed) may be nearing the end f this tightening cycle: The Fed has raised the fed funds rate fur times this year. Our expectatin is that fllwing the December hike, there will be ne mre hike ver the next 12 mnths, bringing the fed funds rate clser tward the neutral level. A Slwer Grwth Frecast: A swarm f macrecnmic risks and headwinds have caught the market s attentin, driving equities and ther risk assets lwer. In all, 2018 has prven rather less prfitable and much mre vlatile than The present envirnment is a mre fragile ne fr risk assets given the cmbinatin f slid but slwing grwth, inflatin that can n lnger be described as lw, central banks that have actively been tightening mnetary plicy, and stck market valuatins that are n lnger cmpellingly attractive. The stck market has shwn greater cncern in recent mnths t the cmbinatin f slwer ecnmic grwth and higher interest rates. We frecast a further deceleratin f grwth int That said, ur base case frecast is nevertheless fr further but mre mdest grwth f apprximately 2.5% in the US ver the cming year. Similarly, we dn t expect significant additinal increases in bnd yields, in part because central banks are sensitive t ecnmic and financial market distress. Page 2

3 Glbal Trade, Prtectinism and the Impact n US Grwth Turning t utstanding trade issues, the tense US-China relatinship is the main act, thugh a handful f blanket tariffs affecting many cuntries represent a secndary cnsideratin. Tackling the lesser issue first, blanket tariffs applied n US imprts f steel, aluminum, slar panels and washing machines as well as thse that are threatened fr auts are currently nly exerting a mild impediment t grwth, and mstly represent temprary bargaining chips designed t extract cncessins. With regard t the main act the US-China trade dispute the breadth f tariffs levied in bth directins has increased substantially in recent quarters and nw cvers several hundred billin dllars f bilateral trade. While a 90-day détente was recently annunced, the grievances between the tw cuntries and the list f US trade demands are such that we assume that trade frictins will persist r even wrsen slightly ver the next year. The US has lately been in an islatinist mde but has begun t awaken frm its slumber. Cngress recently passed with verwhelming supprt a law t substantially bst US infrastructure spending in the develping wrld. As the pwer dynamic shifts frm US hegemny tward a multiplar wrld, it seems reasnable t anticipate nging frictin between the US and China. Glbalizatin and ecnmic grwth tend t fare smewhat wrse in this envirnment as clubs f cuntries jstle fr influence. The US Business Cycle Is Reaching a Late Stage We cntinue t track the prgress f the US business cycle with great interest as it has histrically led the path fr the glbal ecnmy. Key inputs in ur surveillance cntinue t pint t a late cycle diagnsis which is cnsistent with an ecnmic expansin that has n mre than a year r tw remaining. Amng the mst cmpelling ecnmic arguments is that labr markets are nw exceedingly tight the number f jbs in the US is nw greater than the number f unemplyed peple. The ratinale fr viewing a strng jbs market as a ptential negative rather than a psitive is that when ecnmies heat up, they tend t ultimately verheat due t excesses. The shape f the yield curve has histrically prvided a classic and valuable means f assessing the prximity f the next recessin. Histrically, the curve has inverted prir t a recessin. The US yield curve has been flattening fr several years, and is cnceivably n track t invert in Des this prmise an imminent recessin? Nt necessarily, fr several reasns: First, the yield curve tends t invert well in advance f a recessin, Secnd, the yield curve may be sending a distrted message due t the evapratin f the term premium ver the past decade, and Third, newer bnd market signals develped in recent years suggest that the risk f recessin has nt been rising as quickly as the cnventinal measures wuld claim. Mre generally, we cnclude that the US is nt in a recessin tday althugh we generally acknwledge a rising risk ver the next year, but nt enugh t represent a base case frecast. As a result, cautius investment risk-taking seems mre advisable than utright risk aversin. Page 3

4 The Federal Reserve The Fed has raised the fed funds rate fur times this year. Our expectatin is that fllwing the December hike, there may be ne mre hike ver the next 12 mnths, bringing the fed funds rate clser tward the neutral level. Brrwing csts have already increased significantly, and the extent t which they might cntinue t mve higher is unclear due t debates ver what cnstitutes a lng-term neutral rate. Our base case frecast is slightly belw, albeit clser t, the market cnsensus which is belw the Federal Reserve s recent internal survey. A Visin fr Inflatin By virtue f years f persistently abve-ptential ecnmic grwth, the great bulk f the develped wrld s ecnmic slack has been whittled away. Accrdingly, inflatin is n lnger at the rck-bttm levels that prevailed after the crisis, and central banks can n lnger affrd t keep their feet glued t the acceleratr thrugh highly accmmdative mnetary plicies. These are cnsequential changes, with particular relevance fr the bnd market, where inflatin and the plicy rate are tw f the main inputs. The debate as t whether inflatin wuld ever respnd t a tight labr market is being reslved with wage grwth clearly n the rise and there is evidence that wages culd accelerate further frm here. Lking frward, cmmdity prices have clearly lst much f their buyancy, but sme f that culd yet be recvered. Further, tariffs cntinue t be a factr and it seems likely t persist int As a result, we lk fr develped-wrld inflatin t remain mderately higher than nrmal in 2019, yet cre CPI in the US shuld still hver in the area f 2.25%. Lking beynd the New Year, prblematic inflatin levels are unlikely fr several reasns. Frm a cyclical perspective, the fact that husing markets are beginning t cl suggests that the key shelter cst cmpnent is unlikely t exert much upward influence. Frm a US perspective, the dllar s strength ver the past six mnths presents a dampening influence n inflatin. Lastly, frm a structural perspective, disinflatinary frces such as demgraphic and technlgical change make a return t the experiences f the 1970s r 1980s unlikely. Page 4

5 Sptlight n ur Team Angie Brwnawell and Cecilia Kate Draper Angie Brwnawell- Annuncement It is with mixed emtins that I annunce that Angie Brwnawell has elected t pursue a career utside f the Public Funds industry. Since jining ur team in 2013, Angie has been respnsible fr varius administrative and marketing initiatives, and has wrked diligently with ur clients t cntinue t psitively grw the reputatin f ur fund. Angie s last day with the team was January 3 rd, Cecilia Kate Draper- Prmtin t Admin and Marketing Assciate Anther imprtant part f the update, Kate has been prmted t assume many f the respnsibilities that Angie was wrking n. We have frtunately had a significant amunt f time t plan fr this change, and Angie has been wrking with Kate t ensure a smth transitin. Upcming Ecnmic Data Release Dates Change in Nn-Farm Payrlls 01/04/2019 Cnsumer Price Index (YY) 01/11/2019 Cnsumer Cnfidence 01/29/2019 Grss Dmestic Prduct (GDP) 01/30/2019 If yu d like t receive these Market Updates via , please let us knw by clicking here. Click Here fr RBC Glbal Asset Management's Chief Ecnmist Eric Lascelles #MacrMem, which cvers what s n the ecnmic radar (updated weekly). First time visitrs shuld select Institutinal. Page 5